Documenting change: Industry reacts to ‘game changer’ UAE IA rule

By: Gary Robinson | 08 Jun 2017

It has been described as a ‘game changer’ by some, but whatever the terminology, the changes being introduced by the UAE Insurance Authority will impact on advisers and providers in equal measure, as Gary Robinson has found out by speaking to those affected.

Following an announcement on April 25, the United Arab Emirates Insurance Authority issued its anxiously-awaited Board Decision No. 9 document, which has changed slightly from the original Circular 33. The UAE’s insurance industry regulator has, as expected, decided to go ahead with a planned overhaul of the way life insurance products are marketed and sold in the jurisdiction.

The package of new regulations includes a ban on indemnity commissions, as well as fee limits, new charges on life insurance products, and new rules affecting financial advisers who sell insurance products in the UAE.

Gordon Robertson, is the founder and owner of Investme Financial Services, a Dubai-based holding company for a group of financial services businesses operating in the UAE that he launched after originally coming to the Gulf in 1998, to oversee the opening of a Prudential-Bache Securities office. In the early days, he says, he was “amazed and disappointed” at the quality of financial advice on offer in the region. In the years since then, he has observed the progress of Dubai’s financial regulatory environment with interest, and, at times, some scepticism.

‘Not prepared’

The IFA industry in the UAE, he argues, is “not prepared” for the shock it is being asked to take on board, given the fuller clarification of the licensing and educational requirements for intermediaries.“Since November we have been aware of the coming changes in the way insurance-backed savings and investments are sold and marketed in the UAE,” says Robertson, (pictured left).

“There were hopes that the Circular 33 might be watered down. There have been some minor changes as to the implementation, but the surprise was the change in regulating financial intermediaries. “These changes will no doubt mean quite a few intermediaries having to close, merge or leave the industry in the UAE.”

At least one financial adviser that International Investment spoke to in the days after the Board Decision No. 9 document was released said that it revealed the regulator was pushing ahead as planned, “without pulling any punches” and that it had not been deterred by those industry players that sought to have the changes brought in more slowly.

The announcement of the decision to go ahead with the package of new regulations, which also cover the Takaful industry, was contained in a draft circular on the UAE Insurance Authority (IA) website.

Industry feedback

It came after feedback from major international life companies and a meeting held with industry representatives on January 12, and follows on from the IA’s initial announcement last November of its plans to crack down on the industry.

The 26-page document says that the IA “invites life insurance companies and family Takaful operators and other interested parties” to comment on the latest version of its regulations before 11 May, but warns that “absolutely no extensions will be granted”, so that it is able to issue the final regulations “without undue delays”.

Because of the significant changes implied to the way products currently are being sold, a number of industry executives have called for more time to prepare.Still, there are few observers that will argue with the changes – at least not publicly. Simon Willoughby, (pictured left), former head of proposition at Utmost Wealth Solutions, who also chairs the Association of International Life Offices, echoed many in the industry when he said that Utmost’s view on the matter was that any move towards higher regulatory standards and greater cost transparency for customers in any market was to be “applauded”.

“The sensible transitional arrangements announced by the Insurance Authority recognise the industry feedback provided since the November announcement, and the level of change this will require for both providers and advisers,” said Willoughby.

Deputy Editor, International Investment and Head of Video at Open Door Media Publishing.
A fully qualified journalist and filmmaker with more than 20 years' financial services experience, both as journalist and originally as an IFA.